Industry driving property development

An artist’s impression of the new Salesforce Tower in Dublin’s Spencer Dock, which is being developed by Johnny Ronan and US investment group Colony Capital. Salesforce will occupy up to 450,000 square feet at the new development.

Tommy Barker reports on a busy pipeline of property developments. Thirty years ago, the Hollywood movie Field of Dreams had a certain memorable line uttered: “Build it, and they will come.”

It’s no matter, or at least little matter, that the line was heard back in 1989 by a character played by Kevin Costner, in the role of an Iowa corn farmer, who was motivated to build a baseball pitch and ‘diamond,’ in lieu of serried ranks and ears of corn.

Nor does it matter much, at this 30-year remove, that the line Costner’s character actually followed up on was ‘build it and he will come’, referring to ghost players of the past.

Corny, and debatable as it is as a business/property development model, and a bit like the lofty corn stalks themselves, it still holds some currency and sway; it has encouraged many to follow their dreams, from business to property, from down home on the ranch farms and fields to highly valuable urban plots, far removed from grasping-at-straws, hayseed philosophies.

Eastgate, Little Island, an attractive and accessible business park on the outskirts of Cork, a very popular choice of location for companies establishing within reach of the city centre in recent years. Picture: Denis Minihane

Is it in any way a factor behind the current, intensive, production line of gleaming new Irish offices aimed at Foreign Direct Investment (FDI) occupiers?

The visible evidence in Dublin, Cork, and to a lesser extent in other Irish cities (but yet within the pull of ‘the Pale’, such as Intel’s vast pipeline plans for up to two million sq ft of extra chip plant in Kildare) is that we are indeed building offices like billy-o, and primarily for FDI and tech sector occupiers.

As fast as they go, they are getting committed to users, and it’s no exaggeration to say the pace of office development is simply unprecedented, records of take up and individual deals, and headline rents, have all been on a five-year, fast-track trajectory, and has been the sector leader across the construction spectrum.

Up until 2019 at least, the demand has outstripped supply, but after this year, or 2020, who knows?

Dublin skyline

Delivery is at full throttle — witness the crane count on the Dublin skyline where (unlike at Celtic Tiger peaks) office supply vastly outweighs that of rival sectors such as residential or retail, and the scale of take-up is at helter skelter levels: just witness the demand by the likes of Facebook for an additional 850,000 sq ft for its EMEA at the former AIB bank centre in Dublin’s Ballsbridge, to accommodate up to an additional 5,500 employees on top of the thousands it already employs in the capital.

Then, there are the likes of Google, Twitter and others in Dublin, and Apple in Cork — thousands of jobs per company, these are heavyweight names, make no mistake.

Even 2019 got off to a good and unexpectedly (at least to those outside of the cognoscenti) within the IDA’s closed loop of pipeline inquiries) strong start with news that Salesforce was taking 450,000 sq ft at Dublin’s Spencer Dock: sometimes we need to just stand back and consider the sheer scale of this 21st century game-changing evolution, and office space take-up.

There’s a flow in train, that much is obvious, with FDI inquiries (primarily from the US too, let it be noted) feeding in to ‘bums on seat’, and desks on large floor plates in glistening LEED approved new-builds; but as we learned to huge national cost in the last boom, no trajectory goes on forever.

For an open economy like Ireland’s, US president Donald Trump’s tax reforms Stateside may, indeed ‘calm the jets’ on globally mobile FDI investment, and, indeed, 2018 saw evidence of that in many other trading and knowledge-based economies, including Ireland.

Encouragingly, though, whilst US FDI investment globally and demonstrably slowed in 2018, analysts here have pointed to the fact it mostly impacted on new, discretionary business: the major players, who are already comfortably ensconced in Irish ‘homes’, are continuing to invest and to expand.

Notably too — especially in the case of locations like the greater Cork region — it’s not just the tech sector that is maintaining growth patterns, it’s the likes of the pharma and life sciences sectors too, with many of the Top 10 pharma companies well represented in the southern region, and several such as Eli Lilly and MSD in expansion mode.

As an upbeat US FDI case study and sector leader, Lilly is even positively forging ahead on two fronts in Cork alone, at its 35-year-old plant at Dunderrow Kinsale, and also at Eastgate Business Park, on the other side of the city at Little Island, where it is currently doubling its existing office footprint for a financial services-based back office support, with a new, second stand-alone building under advanced construction.

Cork developments

On the broad front, Cork’s capacity to accommodate FDI investment (excluding pharma and the like) is concentrating its focus on the city itself — with limited ‘outlier’ office provision in the wings at the likes of Eastgate (now nearing full site development capacity) and at Ballincollig, as well as at Cork Airport.

City-wise, offices of scale are in fast forward delivery at the likes of Navigation Square, under O’Callaghan Properties who are about to hand over building one (anchored by Clearstream) and who are rising out of the ground on building two — notably, commenced with pre-lets — in a 350,000 sq ft scheme just east of One Albert Quay, and the inching movement to docklands development re-gathers some pace, after previous false dawns and dashed hopes.

There’s up to one million sq ft of office physically already on the way/on the ground in Cork city, with sites currently being developed at 85 South Mall (five years ago, who’d have bet money on the Mall’s renaissance?) by the ever-busy JCD Group at Penrose Dock and HQ/Horgans Quay via BAMand Clarendon, as well as sites such as Sullivans Quay, the Prism by the bus station, Andersons Quay and at Mahon also.

South Mall, Cork.

Lively event horizon

To go back to the Field of Dreams quote or analogy, not everything in Cork is being ‘spec-built’ in the hope of unheralded incoming jobs and investment.

More cautious developers, and funders, still want to see a commitment to pre-lets from new occupiers before construction starts, but there’s more than a fair chance that a good portion of what’s currently being built for FDI users within Cork is, indeed, as much in hope as it is in expectation/contracted.

On the upside, there is plenty of delivery and supply in train, and even at record new office rents heading to €30 per square foot in Cork, that’s only half that c.€60 psf headline level now pitched in Dublin where, surely a cooling must be on the cards given the force of delivery in 2019, 2020 and shortly after that.

The downsides are possibilities of cycle changes coming from game-changing US-side tax and incentives, and while Brexit is a worry, there’s probably as much of an uptick to be harvested as a loss, at least in the tech/financial services sectors, given Ireland’s emerging status as the only native English speaking English-speaking member country, post-Brexit.

Into the mix of local Cork FDI-attracting positives (education, lifestyle options, physical access and expanding infrastructure, etc) must, of course, go the same caveat as is very obvious in Dublin, in Galway and to a lesser extent in other ‘hot’ locations: even if we get all the new jobs, where will the workers get to live?

Build residential, fast, or they won’t come.

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